S&P 500 falls for a fourth day, putting summer market comeback in doubt

Stocks fell Wednesday — the last day of August — in choppy trading, putting the major averages on track for their fourth straight losing session as investors weighted the Federal Reserve’s efforts to fight inflation.

The Dow Jones Industrial Average slid 161 points, or 0.5%. The S&P 500 lost 0.4% and the Nasdaq Composite fell 0.4%. The major averages were higher earlier in the day.

What began as a strong month for the three major averages is on pace to end on a weaker note. The Dow and S&P 500 are currently on pace to finish August more than 3% lower. The Nasdaq is set to end down about 4%.

The moves put the Dow and S&P about 7% and 9%, respectively, above their mid-June lows. The Nasdaq is now more than 12% above its low. The summer rally peak came two weeks ago on August 16, a full two months after hitting the lows on June 16.

Investors had been debating for weeks whether the economy is in a recession or heading toward one, and many thought an economic downturn would give the Fed reason to ease up on its rate hiking plan. Fed Chair Jerome Powell reiterated in his Jackson Hole speech Friday, however, that the central bank is committed to curbing inflation and will continue to raise rates even in a recessionary environment.

“Markets were counting on limited rate increases and quick rate cuts,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “The speech was clear, however, that the increases will be larger, and the cuts more delayed, than anyone expected.”

Powell’s comments sparked a sell-off in stocks. On top of Powell’s comments, Cleveland Fed President Loretta Mester said Wednesday that she sees benchmark interest rates rising above 4% by early next year. On Tuesday, New York Fed President John Williams called for “somewhat restrictive policy to slow demand.“

Correction: The Dow at one point was down 0.5% on the day. A previous version misstated the decline.